CASE STUDY: Department of Defense Contractor Boosts Contract Growth Potential with Short Term Capital

Estimated reading time: 2 minutes

Background

Credit facility limit:
$2,500,000

General description: Engineering Services

State of formation:

Alabama

Customer type:

Department of Defense and large prime contractors

Issue

This Alabama–based engineering firm specializes in aerospace manufacturing, mechanical structures, and electrical components, which support aerospace and ground defense used by the Department of Defense. Despite its longstanding history, the firm projected significant growth in 2024, and as such, planned to pursue larger contracts with the Department of Defense. In order to prepare for contract expansion and significant growth, while also ensuring sufficient cash flow for increased manufacturing cost and volume, the company recognized the need to optimize its positioning.

Proposed Solutions

United Capital Funding (“UCF”) proposed an asset-based, accounts receivable financing facility; which delivered a highly flexible working capital structure that is sufficient and elastic enough to grow along with their current increasing demand. Through this form of financing, the company was able to:

1. Secure an adequate credit facility collateralized by their accounts receivable; then they could have otherwise achieved by leveraging their current balance sheet under a traditional revolving line of credit.
2. Increase liquidity to support contract demand without raising dilutive equity capital.
3. Expand at an integral part of the company’s life cycle without restrictive covenants.
4. Decrease their overall Days Sales Outstanding by working with an institution that has been in business for 25 years supporting its customers with professional receivable management services.
5. Reduce senior management’s time and energy on cash flow management and therefore, allowing greater attention on growing revenues and ensuring customer satisfaction.